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Technology Stocks : THQ,Inc. (THQI)
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To: Wildman262 who wrote (2765)12/26/1997 10:57:00 PM
From: Sigmund  Read Replies (1) of 14266
 
Thanks for the clarification....it makes a lot of sense. Do you have any idea of how much THQI orders from Nintendo? A two month supply, three month supply four month supply etc. They need to reorder at least six weeks before they expect to run out probably more like ten weeks considering the lead time to the stores and some sort of safety factor.

How many weeks of sales data do they need to establish a pattern? Do they collect store sales data? Is there an industry association which does this? They can't establish the sales forecast based on the initial shipments to the stores since the initial shipments are based on expectations. PAX is a special case since they have little or no experience with computer games, but for the other games they must have curves which relate initial sales to projected future sales. Those curves would be worth a fortune to a security analyst but we could perhaps figure them out if we had a bit more data. Perhaps some of the larger stores themselves have such curves to help them plan markdowns.
It's an interesting question how they manage the reorder process. Perhaps a good question for an analyst to raise some day.

I assume that earnings get charged only for the cost of the items associated with orders i.e. revenues. The remainder of the costs sit in finished goods inventory. It is a cash flow question mainly ...exclusive of the obsolesence risk.
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